BILL NUMBER: AB 905	CHAPTERED  04/06/00

	CHAPTER   10
	FILED WITH SECRETARY OF STATE   APRIL 6, 2000
	APPROVED BY GOVERNOR   APRIL 5, 2000
	PASSED THE SENATE   MARCH 27, 2000
	PASSED THE ASSEMBLY   JANUARY 18, 2000
	AMENDED IN ASSEMBLY   JANUARY 13, 2000
	AMENDED IN ASSEMBLY   SEPTEMBER 8, 1999
	AMENDED IN ASSEMBLY   JUNE 16, 1999
	AMENDED IN ASSEMBLY   JUNE 15, 1999
	AMENDED IN ASSEMBLY   MAY 6, 1999
	AMENDED IN ASSEMBLY   APRIL 21, 1999

INTRODUCED BY   Assembly Members Dutra and Cunneen

                        FEBRUARY 25, 1999

   An act to amend Sections 12640.02 and 12640.07 of the Insurance
Code, relating to mortgage guaranty insurance, and declaring the
urgency thereof, to take effect immediately.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 905, Dutra.  Mortgage guaranty insurance.
   The Mortgage Guaranty Insurance Act provides for the regulation of
mortgage guaranty insurance, as defined.  Under these provisions,
mortgage guaranty insurance may be written only to insure loans
secured by first or junior liens on authorized real estate securities
in an amount not to exceed 97 percent of the fair market value of
the securities.
   This bill would increase the allowable total indebtedness on which
this insurance may be written in this circumstance to 100% of the
fair market value of the real estate securities.
   This bill would declare that it is to take effect immediately as
an urgency statute.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 12640.02 of the Insurance Code is amended to
read:
   12640.02.  The definitions set forth in this article shall govern
the construction of the terms used in this chapter but shall not
affect any other provisions of this code.
   (a) "Mortgage guaranty insurance" means:
   (1) Insurance against financial loss by reason of nonpayment of
principal, interest, and other sums agreed to be paid under the terms
of any note or bond or other evidence of indebtedness secured by a
mortgage, deed of trust, or other instrument constituting a first
lien or charge on real estate, provided the improvement on the real
estate is a residential building or a condominium unit or buildings
designed for occupancy by not more than four families.
   (2) Insurance against financial loss by reason of nonpayment of
principal, interest, and other sums agreed to be paid under the terms
of any note or bond or other evidence of indebtedness secured by a
mortgage, deed of trust, or other instrument constituting a junior
lien or charge on real estate, provided the improvement on the real
estate is a residential building or a condominium unit or building
designed for occupancy by not more than four families.
   (3) Insurance against financial loss by reason of nonpayment of
principal, interest and other sums agreed to be paid under the terms
of any note or bond or other evidence of indebtedness secured by a
mortgage, deed of trust, or other instrument constituting a lien or
charge on real estate, provided the improvement on the real estate is
a building or buildings designed for occupancy by five or more
families or designed to be occupied for industrial or commercial
purposes.
   (4) Insurance against financial loss by reason of nonpayment of
rent and other sums agreed to be paid under the terms of a written
lease for the possession, use or occupancy of real estate, provided
the improvement on the real estate is a building or buildings
designed to be occupied for industrial or commercial purposes.
   (b) (1) "Authorized real estate security" for the purposes of this
chapter means either (A) real estate, plus the balance of any
pledged cash account, pledged borrower retirement account, or
collateralized guaranty agreement contracted for by parents, blood
relatives, employers, or nonprofit corporations for the benefit of
the borrower; or (B) real estate securing a note, bond, or other
evidence of indebtedness by a junior mortgage, deed of trust, or
other instrument constituting a junior lien or charge on the real
estate, which, when combined with all existing mortgage loan amounts,
does not exceed a total indebtedness equal to 100 percent of the
fair market value of the real estate at the time the junior loan is
made, provided that, in determining the foregoing 100 percent
limitation, if the loan securing the junior lien is an equity line of
credit loan, the full amount of the line of credit to be secured by
the junior lien shall be considered the amount of the loan, and
further provided, in all cases that both of the following are true:
   (i) The real estate loan secured in this manner is any type of
loan which a bank, savings and loan association, mortgage banker,
credit union, mortgage loan broker, or an insurance company, which is
supervised and regulated by a department of this state or an agency
of the federal government, is authorized to make or arrange, or would
be authorized to make or arrange, disregarding any requirement
applicable to such an institution that the amount of the loan not
exceed a certain percentage of the value of the real estate.
   (ii) The improvement on the real estate is a building or buildings
designed for occupancy as specified by paragraphs (1), (2), and (3)
of subdivision (a).
   (C) The lien on the real estate may be subject and subordinate to
the following:
   (i) The lien of any public bond, assessment, or tax, when no
installment, call, or payment of or under the bond, assessment, or
tax is delinquent.
   (ii) Outstanding mineral, oil or timber rights, rights-of-way,
easements or rights-of-way or support, sewer rights, building
restrictions or other restrictions or covenants, conditions or
regulations of use, or outstanding leases upon the real property
under which rents or profits are reserved to the owner thereof.
   (2) "Authorized real estate security" also means a stock or
membership certificate issued to a tenant-stockholder or
resident-member by a completed fee simple cooperative housing
corporation, as defined in Section 17265 of the Revenue and Taxation
Code and Section 216 of the United States Internal Revenue Code.
   (c) "Contingency reserve" means an additional premium reserve
established for the protection of policyholders against the effect of
adverse economic cycles.
   (d) "Policyholders surplus" means the aggregate of capital,
surplus and contingency reserve.
  SEC. 2.  Section 12640.07 of the Insurance Code is amended to read:

   12640.07.  (a) Mortgage guaranty insurance may be transacted in
this state only by a stock or mutual casualty insurer holding a
certificate of authority for the transaction of the insurance
pursuant to this chapter, and shall be written only to insure either
of the following:
   (1) Loans secured by first liens on authorized real estate
securities not exceeding, at the time the loan is made, 100 percent
of the fair market value of the authorized real estate security, as
defined in subparagraph (A) of paragraph (1) of subdivision (b) of
Section 12640.02.
   (2) Loans secured by junior liens, as defined in subparagraph (B)
of paragraph (1) of subdivision (b) of Section 12640.02.
   (b) Any reciprocal insurer engaging in this type of business shall
be bound by all provisions of this chapter, including the
requirements as to paid-in capital and paid-in surplus.
  SEC. 3.  This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect.  The facts constituting the necessity are:
   In order to ensure affordable financing options for home ownership
in California, it is necessary that this act take effect
immediately.
